Section 15 of the Arbitration & Conciliation Act, 1996

Table of Contents

15. Termination of mandate and substitution of arbitrator.- (1) In addition to the circumstances referred to in section 13 or section 14, the mandate of an arbitrator shall terminate— 

(a) where he withdraws from office for any reason; or 

(b) by or pursuant to agreement of the parties. 

(2) Where the mandate of an arbitrator terminates, a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced. 

(3) Unless otherwise agreed by the parties, where an arbitrator is replaced under sub-section (2), any hearings previously held maybe repeated at the discretion of the arbitral tribunal. 

(4) Unless otherwise agreed by the parties, an order or ruling of the arbitral tribunal made prior to the replacement of an arbitrator under this section shall not be invalid solely because there has been a change in the composition of the arbitral tribunal.

Introduction, History and Background

No substantial amendments have been made to Section 15 since the Arbitration and Conciliation Act, 1996 (“the Act”) was introduced. Section 15 of the Act was similar to Section 8(1)(b) of the erstwhile 1940 Arbitration Act, which deals with substituting an arbitrator who ‘neglects or refuses to act or becomes incapable of acting in the capacity of an arbitrator’. The meaning and scope of this provision was explained in State of West Bengal v. National Builders1 wherein it was held that the court has the power to intervene and appoint an arbitrator, provided there was no agreement to the contrary between the parties. This position was reiterated in Chander Bhan Harbhajan Lal v. State of Punjab.2 Furthermore, in Prabhat General Agencies v. Union of India3, it was held that if the agreement does not provide for anything specific, it is presumed that the parties intended to fill the vacancy.

Sub-sections (1) and (2) of Section 15 of the Act are based on Article 15 of the UNCITRAL Model Law on International Commercial Arbitration.4

Scope of the Section 

Section 15 governs the circumstances where the mandate of an arbitrator may come to an end and where a substitute arbitrator may have to be appointed. Its scope is threefold:

Firstly, while Sections 13 and 14 already deal with ‘challenges to’ and ‘termination of’ an arbitrator’s mandate for reasons such as bias, inability to perform, or undue delay, Section 15 adds further grounds. Specifically, it covers the termination of an arbitrator’s mandate when the arbitrator voluntarily withdraws for any reason, or when the parties by mutual agreement end the arbitrator’s appointment. 

Secondly, once an arbitrator’s mandate stands terminated under Section 15, the statute requires that a substitute arbitrator be appointed according to the “rules” or procedure originally applicable. This ensures continuity of the arbitral process and prevents the proceedings from collapsing due to the arbitrator’s exit. 

Thirdly, Section 15 also addresses how hearings and rulings delivered by the earlier tribunal will be affected. Unless the parties agree otherwise, the newly constituted tribunal has discretion on whether to repeat the earlier hearings. Likewise, previous orders or rulings remain valid unless the parties decide otherwise.

Two further points warrant mentioning. First, the Delhi High Court, in Tricolours Hotels Limited and Others v. Dinesh Jain and Others5, observed that Article 137 governs the limitation period under Section 15, whereby a period of three years is provided from the date when the right to apply accrues, and that the limitation period would not commence from when the parties had knowledge qua the recusal order passed by the earlier arbitrator. Even when such mandate is terminated and a substitute arbitrator is appointed, the Delhi High Court, in Extramarks Education India Pvt. Ltd. v. Saraswati Shishu Mandir6, observed that the arbitration proceedings would not begin anew and would resume from the stage at which it was left by the previous arbitrator. 

Termination of Mandate

Section 15(1) provides two specific grounds for terminating an arbitrator’s mandate in addition to those under Sections 13 and 14. These are:

Withdrawal of the Arbitrator

The arbitrator may withdraw from office for any reason (Section 15(1)(a)). This could be due to personal reasons, health issues, or a conflict of interest that arises post-appointment. For instance, in the seminal case of Yashwith Construction P. Ltd. v. Simplex Concrete Piles India Ltd.7 (Yashwith), the arbitrator withdrew from office owing to deteriorating health conditions. The Supreme Court exposited the scope of Section 15 and observed that the appointment of a substitute arbitrator  under Section 15(2) would be warranted if the arbitrator withdrew from office under Section 15(1)(a). Moreover, in SAN-A Trading Co. Ltd. v. I.C. Textiles Ltd.8, it was observed that when a named arbitrator refuses to act due to any reason stated herein, a substitute arbitrator can be appointed under Section 15(2), provided there is an arbitration agreement allowing for the same. Section 11(6) could be invoked to seek a court-appointed arbitrator only when one of the parties failed to appoint an arbitrator in terms of the arbitration agreement. In Rajasthan Small Industries Corporation Limited v. Ganesh Containers Movers Syndicate9, the Supreme Court even invoked its inherent powers under Article 142 of the Constitution to set aside an award whereby an independent arbitrator had been appointed, which was contrary to the appointment process under the arbitration agreement.  The Court was of the categorical view that the same arbitration agreement must govern the process of appointing the substitute arbitrator. In the absence of any material to show lack of independence or impartiality on the part of the arbitrator, no presumption of bias could possibly exist so as to declare the arbitrator de jure ineligible to hold office.

Lastly, in Shailesh Dhairyawan v. Mohan Balkrishna Lulla, (2016) 3 SCC 61910, the Supreme Court distilled the scope of Section 15(2) and held that a purposive and liberal reading of the said provision was necessary to cater to a wide variety of situations. However, Section 15(2) could be invoked to appoint a substitute arbitrator unless there was a debarment or prohibition by the arbitration agreement, whose contents would be given precedence over the provision.

Agreement of the Parties

The parties may mutually agree to terminate the arbitrator’s mandate (Section 15(1)(b)).  In addition to the grounds provided in Section 15, the arbitrator’s mandate may stand terminated in a challenge to the arbitrator under Section 13 or the de jure or de facto inability to act under Section 14. An arbitrator may become de jure or de facto unable to act. A de jure inability arises from legal incapacity, such as non-fulfilment of eligibility criteria under Section 12(5), whereas de facto inability could occur due to physical incapacitation or practical circumstances that prevent the arbitrator from discharging their duties effectively.

In terms of the effect on existing orders and rulings, Section 15(4) ensures that the substitute arbitrator does not automatically invalidate any rulings or orders made by the previous arbitrator. Unless otherwise agreed by the parties, these such rulings and orders remain valid. This provision ensures that the substitution of an arbitrator does not disrupt the continuity or validity of the arbitral proceedings.

Substitution of Arbitrator 

Section 15(2) clearly indicates that upon termination of mandate of an arbitrator, a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of replaced arbitrator (as explained in the Deepak Galvanising & Engg. Industries Pvt. Ltd v. Government of India11 case). This requirement ensures consistency and adherence to the established procedural framework, thereby preserving the integrity of the arbitration process. The term “rules” encompasses not only statutory or institutional rules but also the specific terms outlined in the original arbitration agreement between the parties. For instance, in Yashwith (supra), the arbitrator had to be substituted due to ill health,. The arbitration agreement between the parties explicitly authorised the managing director of the Respondent company to appoint a substitute arbitrator. Therefore, the appointment was in line with the agreement of the parties and fell within the ambit of Section 15(2). Furthermore, the R.D. Gupta v. Union of India12, although in the context of Section 8(1)(b) of the Arbitration Act, 1940, held that the parties may agree upon who the next arbitrator will be and the agreement may name a sole arbitrator and provide that the named arbitrator may appoint another arbitrator, in case he is unable or unwilling to act. These cases thus establish the primacy of arbitration agreements in deciding the identity of the substituted arbitrator. 

The substitution process can involve the parties agreeing on the procedure for appointing substitute arbitrators as stipulated in the arbitration agreement. Even if the agreement does not prescribe the procedure for appointment of substitute arbitrators, the procedure agreed for the appointment of arbitrators will be applicable to substitute arbitrators. The aforesaid legal position was affirmed in ACC Ltd. v. Global Cements Ltd.13. In scenarios where the arbitration agreement does not provide for the process of substitution, parties may designate the authority responsible for appointing the substitute arbitrator, as seen in Yashwith (supra). Additionally, if the agreement stipulates that the  arbitrator has the power to appoint another arbitrator in case of their inability to act, the arbitrator can appoint a substituted arbitrator under Section 15(2) and in case even the substituted arbitrator is unable to act, the first arbitrator can appoint an alternate substituted arbitrator. The aforesaid legal position was confirmed in Surendranath Paul v. Union of India.14 Moreover, in case of appointment by designation wherein the agreement states that the person holding a particular position will be appointed as the arbitrator, if the person so appointed is unable to act, the next person occupying that position will automatically be appointed as the substituted arbitrator. In Arun and Co. v. Union of India15, the designation in question was that of the Director General of Supplies and Disposal. An important caveat to note is that once the parties agree to the method of appointment or acquiesce to the appointment made, they cannot later raise a plea to invalidate the same, provided the acquiescence was made with full knowledge of the relevant circumstances. This  principle of estoppel was explained in Neelkanth and Bros Construction v. Superintending Engineer, National Highways, Salem.16

Furthermore, Section 15(3) allows for the repetition of any hearings previously conducted by the replaced arbitrator at the discretion of the arbitral tribunal, unless the parties have agreed otherwise. Therefore, the hearing will continue from where it left off and the evidence recorded by the previous arbitrator with respect to an arbitration proceeding will also be admissible after substitution, notwithstanding the mode of proof specified in the Indian Evidence Act, 1872, provided the parties agree to the same. On the other hand, if the parties agree that the hearing should start anew before the new arbitrator, this agreement must be honoured. This was held in Kalyan Peoples Co-operative Bank Ltd. v. Dulanbibi.17 This upholds the fundamental principle of party autonomy in arbitral proceedings.  

Interplay with other Provisions 

Section 15 works in tandem with other sections of Act insofar as the mandate of an arbitrator is concerned. 

Section 13, which deals with challenges to the impartiality or independence of arbitrators, complements Section 15 by providing additional grounds and procedures for terminating an arbitrator’s mandate. While Section 13 focuses on specific challenges related to the arbitrator’s conduct, Section 15 addresses broader grounds such as withdrawal and mutual agreement and provides the procedure for substituting an arbitrator whose mandate has been terminated. While Section 14 deals with the termination of an arbitrator’s mandate due to de jure or de facto inability, Section 15 governs the next step of substitution of the arbitrator after the termination of the mandate of the previous arbitrator/s.

  1. State of West Bengal v. National Builders, (1994) 1 SCC 235, para. 4.  ↩︎
  2. Chander Bhan Harbhajan Lal v. State of Punjab, (1977) 2 SCC 715, paras. 4, 5.  ↩︎
  3. Prabhat General Agencies v. Union of India, (1971) 1 SCC 79, paras. 5, 6. ↩︎
  4. UNCITRAL Model Law on International Commercial Arbitration, art. 16, U.N. Doc. A/40/17, Annex I (1985), as amended by U.N. Doc. A/61/17 (2006). ↩︎
  5. Tricolours Hotels Limited and Ors. v. Dinesh Jain and Ors., 2022 SCC OnLine Del 3717. ↩︎
  6. Extramarks Education India Pvt. Ltd. v. Saraswati Shishu Mandir, 2024 SCC OnLine Del 3710. ↩︎
  7. Yashwith Construction Pvt. Ltd. v. Simplex Concrete Piles India Ltd., (2006) 6 SCC 204, paras. 4, 5.  ↩︎
  8. SAN-A Trading Co. Ltd. v. IC Textiles Ltd., (2012) 7 SCC 192 paras. 17-19.  ↩︎
  9. Rajasthan Small Industries Corporation Ltd. v. Ganesh Containers Movers Syndicate, (2019) 3 SCC 282.  ↩︎
  10. Shailesh Dhairyawan v. Mohan Balkrishna Lulla, (2016) 3 SCC 619.  ↩︎
  11. Deepak Galvanising & Engg. Industries Pvt. Ltd. v. Government of India, 1997 SCC OnLine AP 638, para. 10. ↩︎
  12. RD Gupta v. Union of India, (1971) 3 SCC 817, para. 7. ↩︎
  13. ACC Ltd. v. Global Cements Ltd., (2012) 7 SCC 71, paras. 17, 18, 19, 21, 22.  ↩︎
  14. Surendranath Paul v. Union of India, 1964 SCC OnLine Cal 30, paras. 8, 14.  ↩︎
  15. Arun and Co. v. Union of India, A.I.R. 1964 Punj 230, paras. 3-5.  ↩︎
  16. Neelkanth and Bros Construction v. Superintending Engineer National Highways, Salem, (1988) 4 SCC 462, paras. 2,3.  ↩︎
  17. Kalyan Peoples Co-operative Bank v. Dulanbibi, 1962 SCC OnLine SC 283, paras. 5, 6. ↩︎